Correlation Between IShares SPTSX and BMO Covered
Can any of the company-specific risk be diversified away by investing in both IShares SPTSX and BMO Covered at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares SPTSX and BMO Covered into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SPTSX Capped and BMO Covered Call, you can compare the effects of market volatilities on IShares SPTSX and BMO Covered and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares SPTSX with a short position of BMO Covered. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and BMO Covered.
Diversification Opportunities for IShares SPTSX and BMO Covered
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and BMO is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and BMO Covered Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Covered Call and IShares SPTSX is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares SPTSX Capped are associated (or correlated) with BMO Covered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Covered Call has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and BMO Covered go up and down completely randomly.
Pair Corralation between IShares SPTSX and BMO Covered
Assuming the 90 days trading horizon iShares SPTSX Capped is expected to generate 1.33 times more return on investment than BMO Covered. However, IShares SPTSX is 1.33 times more volatile than BMO Covered Call. It trades about 0.07 of its potential returns per unit of risk. BMO Covered Call is currently generating about 0.01 per unit of risk. If you would invest 2,835 in iShares SPTSX Capped on August 28, 2024 and sell it today you would earn a total of 30.00 from holding iShares SPTSX Capped or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SPTSX Capped vs. BMO Covered Call
Performance |
| Timeline |
| iShares SPTSX Capped |
| BMO Covered Call |
IShares SPTSX and BMO Covered Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SPTSX and BMO Covered
The main advantage of trading using opposite IShares SPTSX and BMO Covered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX position performs unexpectedly, BMO Covered can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BMO Covered will offset losses from the drop in BMO Covered's long position.| IShares SPTSX vs. BMO Equal Weight | IShares SPTSX vs. BMO SPTSX Equal | IShares SPTSX vs. BMO Equal Weight |
| BMO Covered vs. BMO Covered Call | BMO Covered vs. BMO Canadian High | BMO Covered vs. BMO Europe High | BMO Covered vs. Harvest Healthcare Leaders |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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